Impactful intent: RPI report 2019

In 2018 we launched the Hermes impactful intent framework as part of our commitment to deliver positive societal and environmental outcomes alongside strong risk-adjusted returns. In our 2019 responsible property investment (RPI) report, we consider how our holistic approach to real-estate investment has created healthier workplaces and helped bring the ‘meaningful city’ concept to life.

44%

Reduction in emissions in seven properties managed by Hermes since 2014

£13bn

The capital value of Hermes’ eight urban-regeneration developments over the past six years

£7.3bn

Assets under management in Hermes real-estate mandates

A framework for sustainable investment

Our decision to create an impactful intent framework was inspired by our previous efforts to develop common definitions and guidelines that describe ‘impact’ for real-estate investors. Using the Sustainable Development Goals as a reference point, we developed the framework as a way to further improve our approach to sustainable investment.

Over the past year we have translated this impact framework into constructive action points for the investment strategies and unit trusts in the Hermes real-estate offering. We identified three themes to focus on for 2019:

Meaningful placemaking

Climate and resource efficiency; and,

Health and wellbeing

After defining these three areas, we initiated a screening process to identify socioeconomic and environmental-impact targets for the portfolio. This process shed light on regional needs and local environments, which enabled us to set specific, measurable targets for each fund or mandate.

Placemaking

At the heart of our approach is our commitment to creating the ‘meaningful city’ – or places that people want to live and work in, and which foster a sense of belonging among inhabitants. Because most of our investment is concentrated in densely populated urban areas, it is inevitable that the way we manage these developments will have a deep, long-lasting effect on the cities and the people that live in them.

‘A commitment to meaningful placemaking is a cornerstone of our real-estate investment philosophy, as laid out in the impact framework’

Over the past six years, Hermes has undertaken eight large urban-regeneration developments across the UK, spanning a combined 19m square feet and £13bn-worth of capital value. The sites showcase our meaningful placemaking and include the NOMA building in Manchester, King’s Cross in London and Wellington Place in Leeds.

Benchmarking results

Our 2019 RPI report has formed the basis of a pilot benchmarking study that normalises the outcomes of three of our developments: King’s Cross, NOMA and Wellington Place. We have delivered economic, social and community-oriented results across the three projects (see figure 1).

The pilot study produced some interesting results. One of these was the finding that NOMA employees earn more than workers at our King’s Cross site. Indeed, wage rates at NOMA are 45% higher – roughly £12,000 – than for the average Greater Manchester worker.

Benchmarking the impact that we have gives us a more nuanced view of the day-to-day ‘lived experience’ of the sites we develop. We will continue to do this so we can fully understand the extent to which we have helped develop the ‘meaningful city’ in different areas.

Healthier workplaces

In addition to driving social outcomes, a significant focus of ours this year has been promoting healthier working environments. One noteworthy achievement was when our development at 33 Glasshouse Street in London became the first certified RESET™ Air – Shell & Core project in Europe.

RESET™ provides active monitoring of indoor air quality and helps ensure that the areas occupied by tenants are healthy ones. At 33 Glasshouse Street, indoor air-quality data is gathered on metrics including CO2, particulate matter and temperature. Eventually, real-time air-quality data will be available to occupiers via a screen in the reception area. We think this is a positive way to engage with tenants and will continue to measure and improve the quality of indoor air in our developments.

Impactful outcomes

We are already seeing positive outcomes just a year on from launching our impactful intent framework. But these results do not come at the expense of financial returns. Meaningful placemaking can enhance the value of properties through energy efficiency, reduced vacancy periods, lower operating costs and the fact that they are better placed to retain tenants. It is these benefits, along with tangible social and environmental outcomes, that are the holistic returns we seek to deliver.

CEO of Real Estate & Head of Private Markets, International at Federated Hermes

Chris is Head of Real Estate & Private Markets and a member of the Executive Committee. Chris joined the international business of Federated Hermes in 2010, having successfully established Australian fund manager QIC’s European office in London. Prior to that, he was head of European Property at HSBC. Chris spent the majority of his career as a fund manager at Prudential, where he led the diversification of its UK real estate exposure into overseas markets in 2001.

Under his leadership, the Real Estate business has led a number of landmark real estate transactions, including the largest regeneration project in Europe at King’s Cross, the development of the iconic Silverstone circuit, the major regeneration at Paradise Circus Birmingham, and the rejuvenation of central Milton Keynes. Chris is currently the Chairman of MEPC, a Fellow of the Royal Institution of Chartered Surveyors, the senior non-executive director of NewRiver Retail Plc, a member of the Bank of England Commercial Property Committee and a Founding Board Member of INREV. As immediate past President of the British Property Federation, Chris has engaged actively with Central and Local Government to recognise the pivotal contribution that real estate and infrastructure make as conduits for growth and regeneration.

Chris is also the BTPS Director on the Argent Board and has taken a lead role in promoting responsible investment with major regeneration schemes at King’s Cross and Paradise Circus, Birmingham.